Nestlé continues e-commerce expansion with SimplyCook acquisition: ‘Direct-to-consumer will continue to grow in the future’

By Katy Askew

- Last updated on GMT

Nestle acquired SimplyCook as its direct-to-consumer push continues / Pic: Nestle
Nestle acquired SimplyCook as its direct-to-consumer push continues / Pic: Nestle

Related tags Direct to consumer D2C Nestlé

Nestlé continues to lean into the direct-to-consumer (D2C) channel as part of its portfolio transformation strategy. This week, the Swiss food giant snapped up UK recipe kit company SimplyCook. With the changes ushered in by COVID expected to leave a lasting mark on consumption patterns, expectations for D2C sales are high.

COVID-19 has accelerated the UK’s online grocery market. Data from Edge by Ascential suggests the surge in e-commerce is expected to add £5.3bn to UK online sales this year, raising the value of the market to £78.9bn.

The country’s supermarket operators have struggled to keep up with e-commerce demand during the lockdown as consumers look to avoid physical shopping trips. Edge by Ascential raised forecasts for Tesco’s 2020 online revenue, with expected gross sales rising by an extra £1.7bn to reach a total of £61.1bn, up from forecasts of £59.4bn prior to the pandemic. This is followed by Sainsbury’s, which will add an extra £0.6bn in sales to reach £31bn by the end of 2020.

But supermarkets aren’t the only big winners. Recipe box sales from companies like Hello Fresh, Gousto and Mindful Chef have been boosted by the closure of out-of-home foodservice as consumers seek out more restaurant-like dining experiences at home. In April 2020, recipe box sales increased by 114% compared to the prior year, purchase intelligence platform Cardlytics reported.

GettyImages-Ake1150SB - food delivery
D2C delivery sales have spiked in 2020 / Pic GettyImages-Ake1150SB

COVID-19 has clearly accelerated direct-to-consumer sales. But it isn’t just a lockdown phenomenon – D2C is thought to be a trend with sticking power.

As Cardlytics revealed, consumer spend on delivery services was on an upward trajectory ahead of the pandemic, rising 15% in the year from April 2019-2020. Growth was driven by a higher number of transactions per customer, which was up 10%. This suggests that when consumers start buying into D2C, the model is able to grow share of wallet.

“The gradual rise of the UK’s door-to-door economy has become a relentless surge….More and more brands are embracing this approach as this economy becomes the new normal for us all,”​ Duncan Smith, Commercial Director at Cardlytics UK, said. “It’s unlikely the number of us ordering to the comfort of our sofas will go anywhere but up, even after lockdown lifts.”

Nestlé agrees with this assessment. “We do believe that the channel will continue to grow in the future,”​ a spokesperson for the company told FoodNavigator.

Nestlé’s fourth D2C deal

In order to capitalise, Nestlé is growing its presence in D2C.

The company revealed its fourth acquisition in the space earlier this week when it snapped up recipe kit company SimplyCook in the UK. The deal follows on the heels of three other acquisitions in D2C: Mindful Chef and (its first foray into D2C in pet food) in the UK alongside Freshly in the US.

Nestlé said the agreement brings together its ‘extensive expertise in nutrition’ and ‘industry leading research capability’ with SimplyCook’s ‘entrepreneurial vision to make cooking more accessible’. The brand will continue to be led by its founding team.

Launched in 2014, SimplyCook provides pre-portioned chef-created flavour blends and recipes. It has nationwide reach and what Nestlé described as an ‘accessible proposition with mass market potential’.

For founder Oli Ashness, the deal is an opportunity to step up growth. “Nestlé’s experience, operational expertise, and international know-how gives us the opportunity to expand further in the UK and beyond, making cooking more accessible for millions more consumers in far less time than we previously imagined,”​ he said.

Simply Cook - Nestle
SimplyCook aims to make cooking 'more accessible' / Pic: Nestle

Expanding in ‘high growth’ segments

For Nestlé, the acquisition should be viewed in the context of its portfolio transformation strategy, leveraging M&A to increase its exposure to attractive market segments, including digital.

“We remain committed in our portfolio transformation process, which will continue towards higher growth and more differentiated products. As the behaviour of our consumers continues to evolve, it is important that we also evolve our way in which we reach our consumers with our products. DTC is one of the many ways that we look to serve our consumers and will play a role in accelerating our broader e-commerce business,”​ a spokesperson for the group noted.

The company is currently concentrating its D2C investment on more developed markets for the channel, with deals focused on the UK and US. “The relevance and maturity of the D2C channel differs across the globe and between our categories, and therefore we prioritize our investments accordingly.”

M&A is not the only strategy that Nestlé is leveraging to grow in D2C. “We are growing both organically and through acquisitions and building capabilities,”​ the spokesperson added.

Indeed, the company has seen ‘very good growth’ in D2C for ‘Nespresso and other brands’ over the past year.

“In 2020, Nespresso sales reached CHF5.9bn, with organic growth accelerating to 7%, the highest level in the last six years,"​ the spokesperson detailed. Total e-commerce sales for the year grew by almost 50% to more than CHF10bn in the year, according to the company's most recent financial update. 

For Stifel analyst Alain-Sebastian Oberhuber, this performance comes as evidence that the company's approach is proving effective. “Nestlé’s e-commerce strategy is successful. Total e-commerce sales represent 12.8% of group revenues with growth of 48.2%,”​​ he said.

With ongoing investment in digital solutions and direct-to-consumer businesses - alongside the buoyant market trends that are forecast to continue when COVID lockdown measures are eased - it seems likely that this contribution will continue to expand. 

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